marketing exam 2
specialty products
- 3 plode pricing - strong brand preference and loyalty, special purchasing effort, little comparison shopping - high price - exclusive distribution in only one or a few outlets per market area - carefully targeted promotion by both producer and resller - e.g. lamborghini, rolex watches
types of cost-based pricing
- Cost-plus pricing (markup pricing) - Break-even pricing - Target return pricing
idea generation
- Internal sources: -- Company employees at all levels - External sources: -- Customers -- Competitors -- Distributors -- Suppliers -- Outsourcing (design firms, product consultancies, online collaborative communities) ex: samsung built a special value innovation program center in which firm engineers, designers, and researches comingle to come up with creative new-product ideas
why do new products fail?
- Overestimation of market size - Design problems - Incorrectly positioned, priced, or advertised - Pushed despite poor marketing research findings - Excessive development costs - Competitive reaction
branding
- advantages to buyers: -- helps identify products -- cue to product quality and consistency - advantages to sellers: -- basis for product's quality story -- provides a legal protections -- helps to segment markets
3 different crazes
- bicycle craze - car craze - internet craze
shopping products
- bought less frequently, more planning and effort, brand comparisons on basis of price, quality, style - higher price - selective distribution in fewer purchase locations - advertising and personal selling (salesperson) is undertaken by both producer and reseller. - e.g. furniture, clothing, cars, appliances
figure 7.5: brand strategy decisions
- brand positioning (competition) -- attributes (what customers believe the product to be) -- benefits -- beliefs and values - brand name selection -- selection -- protection - brand sponsorship -- manufacturer's brand -- private brand -- licensing -- co-branding - brand development -- line extensions -- brand extensions -- multibrands -- new brands
types of consumer goods:
- convenience goods - shopping products - specialty products - unsought products
3 levels of product
- core customer value - actual product - augmented product
cost-based pricing
- costs set the floor for the price that the company can charge - product-driven rather than value-driven types of costs: - fixed costs: do not vary with production or sales level - variable costs: vary directly with the level of production
Figure 9.1 - Considerations in Setting Price
- customer perceptions of value -- price ceiling; no demand above this price -- valuebased -- a lot more about consumer - other internal nd external considerations -- making strategy, objectives, and mix -- nature of the market and demand -- competitiors' strategies and prices -- competition based - product costs -- how much did it cost to make this product? -- price floor; no profits below this price -- cost-based
decline stage of PLC
- cut back on promotion - DOG - retro stage: things coming back - sales: declining sales - costs: low cost per customer - profits: declining profits - customers: laggards - competition: declining number - marketing objective: reduce expenditures and milk the brand (getting the last bit out that you can from this company
price vs value
- cutting cost in tough economic times isn't always the answer. companies should sell value, not price price reductions can: - cut profits and initiate price wars - cheapen perceptions of brand quality - marketers should strive to convince consumers that price is justified by value provided
figure 9.4 demand curve
- depicts a supply and demand curve - the more quantity demanded, the higher the prices
product development
- develops a concept into a physical product - calls for a large jump in investment - prototypes are made - prototypes must have correct physical features and convey psychological characteristics - prototypes are subjected to physical tests
Customer-centered new product development
- focused on finding new ways to solve customer problems and create more customer-satisfying experiences - new product development must focus on creating customer value
elastic demand
- high demand change; higher or lower
Figure 8.1 - Major Stages in New Product Development
- idea generation - idea screening - concept development and testing - marketing strategy development - business analysis - product development - test marketing - commercialization
figure 7.3 four service characteristics
- intangibility -- services that cannot be seen tasted, felt, heard or smelled before purchase - variability -- quality of services depends on who provides them and when, where, and how - inseparability -- services cannot be separated from their providers - perishability -- services cannot be stored for later sale or use
other factors affecting pricing decisions:
- internal factors: -- overall marketing strategy, objectives, and the marketing mix -- organizational considerations - external factors: -- the market and demand -- the economy -- other external factors
figure 7.4: three types of service marketing
- internal marketing -- marketing to employees and suppliers - interactive marketing -- only for services -- dealing with customers - external marketing -- customers -- outside the company
figure 8.2: sales and profits over the products life from inception to decline
- introduction -- stages of product life cycle starts here
business analysis
- involves a review of the sales, costs, and profit projections to find out whether they satisfy the company's objectives - if results are positive, project moves to the product development phase
packaging
- involves designing and producing the container or wrapper for a product - ideally, good packages should: -- help to market the brand -- protect the contents -- provide convenience and ease of use -- ensure product and user/child safety -- address environmental concerns
figure 7.6: brand development strategies
- line extension: product category --> existing brand name --> existing - multibrands: product category --> existing brand name --> new - brand extension (going out of the ordinary): product category --> new brand name --> existing - new brands product category --> new brand name --> new
the service-profit chain
- links employee and customer satisfaction to firm profits - 5 links exist within the chain: -- internal service quality -- satisfied and productive service employees -- great service value -- satisfied and loyal customers -- healthy service profits and growth -money - people - profits
unsought products
- little product awareness or knowledge of the brand, sometimes negative interest - pricing strategies vary - distribution strategies vary - require aggressive advertising and personal selling by both producer and resellers - e.g., life insurance, cemetery plots, blood donation
types of industrial goods
- materials and parts - capital items - supplies and services
product support services
- monitoring of support services is key: -- talk with customers to assess the value and quality of current services and to obtain ideas for new services -- fix problems and put together a package of new services that delights the customers and yields profits for the company -- new technologies can often many support service offerings
commercialization
- must decide on timing (i.e., when to introduce the prodcut) - must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally) - must develop a market rollout plan
brand sponsorship
- national brands -- also called manufacturer brands - store brands -- also called private brands -- for ex: kirkland, good and gather - licensed brands -- name or character licensing - co-branding --creates broader appeal and brand equity -- 2 companies not competing against each other
market-skimming pricing
- new product pricing - starting high then going low - setting a high price for a new product to "skim" revenues layer-by-layer from those willing to pay the high price - company makes fewer, but more profitable sales - overtimes the price will go down b/c of: -- competition -- cost to make it will be less -- demand goes up
interactive marketing
- only for services - training service employees in the fine art of interacting with customers to satisfy their needs
customer value-based pricing
- price is considered along with the other marketing mix variables before the marketing program is set -- customer needs and value perceptions are assessed -- target price is based on value perception - types of value-based pricing: --- good value pricing --- value-added pricing
idea screening
- process used to spot good ideas and drop poor ones - executives provide a description of the product along with estimates of market size, product price, development time and costs, manufacturing costs, and rate of return - evaluated against a set of company criteria for new products
testing marketing
- product and marketing program are introduced in a more realistic market setting - not needed for all products - can be expensive and time consuming, but better than making a major marketing mistake
applying the product life cycle
- product class has the longest life cycle - product form tends to have the standard PLC shape - brand can change quickly because of changing competitive attacks and responses - style is a basic and distinctive mode of expression - fashion is a popular style in a given field - fads result in a temporary period unusually high sales driven by consumer enthusiasm. fads decline quickly
concept development and testing
- product idea -- idea for a possible product that the company can see itself offering to the market - product concept -- detailed version of the new-product idea stated in meaningful consumer terms - concept testing -- testing new-product concepts with groups of target consumers to find out if the concepts have strong consumer appeal
product line decisions
- product line length is a major decision -- filling (adding more) -- stretching (downward, upward, or both ways ) changing the customer base we are serving to
consumer products
- products and services bought by final consumers for personal consumption - also included are other marketable entities - classified by how consumers buy them: -- convenience, shopping, specialty, and unsought goods (don't buy until they need it)
ideas (social marketing)
- public health campaigns, environmental campaigns, family planning or human rights - designed to influence individual's behavior to improve their well being and that of society - UNCF powerfully markets the idea that "a mind is a terrible thing to waste"
convenience goods
- purchased frequently and immediately with little comparison shopping - low priced - mass advertising and promotion - widespread distribution with many convenient locations - e.g, candy, soda, newspapers
price elasticity of demand
- refers to how responsive changes in demand will be to a change in price - what happens to the number of customers when there is a change in price
labeling
- refers to printed information appearing on or with the package, including the product name - performs several functions: -- identifies product or brand -- describes several things about the product -- promotes the product through attractive graphics - labeling is regulation by the government
introduction stage of PLC
- sales: low - costs: high cost per customer (customer acquistion cost: how much it costs to get a customer) - profits: negative or low - customers: innovators - competitiors: few - marketing objective: create product awareness and trial - most amount of money spent in promotion is during the introduction stage
growth stage of PLC
- sales: rapidly rising - costs: average cost per customer (going down because they already know about the product) - profits: rising profits - customers: early adopters - competitors: growing number - distribution: build intensive distribution - marketing objective: maximize market share: get the largest % possible trying to get as many people in the target market
inelastic demand
- small demand change; higher or lower
new-product development
- the development of original products, product improvements, product modifications, and new brands through the firm's own product development efforts - new product development and innovation is very expensive and very risky
brand equity
- the differential effect that knowing the brand name has on customer response to the product or its marketing - measures the brand's ability to capture consumer preference and loyalty - is a valuable asset that offers many competitive advantages - builds strong and profitable customer relationships that result in LOYAL CUSTOMERS (customer equity) - ex: supreme
service:
- the focus is on people - any activity, benefit, or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything
industrial products
- those purchased for further processing or for use in conducting business - distinction between consumer and industrial products is based on the purpose for which an item is bought (e.g. home or business use) - business to business
Figure 9.3 chart for determining target-return price & break even volume
- total cost = fixed + variable - breakeven (Where the lines intersect): where we sold enough at a given price to cover our cost - target return: profits -cpm: cost per thousand; the more you buy something in quantity the less it costs
product mix decisions
- width: the number of different product line the company carries - length: the number of items in a line - depth: the number of versions offered of each product in the line - consistency: how closely related various lines are
maturity stage of PLC
- you essentially made it but this doesn't guarantee you're gonna be there forever - sales: peak sales - costs: low cost per customer (customer tells their friends/families) - profits: high profits - customers: middle majority - competitiors: stable number beginning to decline - marketing objective: maximize profits while defending market share and look for new markets
product and service attributes
-Product quality dimensions: --Performance quality --Conformance quality -Product feature considerations: --Value to consumer --Cost to company -Product style and design: --shapes the buyer's usage experience
Figure 9.2 - Value-Based Pricing versus Cost-Based Pricing
Cost- based pricing (product is already made): - design a good product - determine products costs - set price based on costt - convince buyers of product's value Value-based pricing (product is made at the end): - assesss customer needs and value perceptions - set target price to match customer perceived value - determine costs that can be incurred - design product to deliver desired value at target price
practical problems of PLC
In practice, it is difficult to: - Forecast sales level, length of each stage, and shape of PLC. - Develop marketing strategy, as strategy is both a cause and result of the PLC. - marketers should avoid blindly pushing products to next stage and instead seek ways to rescue products and growth sales
systematic new product development
Innovation management systems collect, review, evaluate, and manage new product ideas
marketing strategy development
Part One: Describes the target market, planned value proposition (differentiation), sales, market share, and profit goals. Part Two: Outlines the product's planned price, distribution, and marketing budget. Part Three: Describes the planned long-run sales and profit goals, marketing mix strategy.
persons
Politicians, entertainers, sports figures, doctors, and lawyers.
product line
a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges
brand
a name, term, symbol, design, or combination thereof that identifies the products or services of one seller or group of sellers and differentiates them from those of competitiors - branding involves building and managing brands
augmented product
additional services and benefits such as delivery and credit, instructions, installation, warranty, and service
the market and demand
analyzing the price-demand relationship: - different prices result in different levels of demand, as shown by the demand curve
marketing in action (competition-based pricing)
annie bloom's books cannot compete directly on the basis of low prices, but relies on outstanding customer service and a cozy atmosphere to convert booklovers to loyal customers
product:
anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need
business to business
apple to best buy
test marketing is..
appropriate when a large investment is required when the risk is high, or when management is not sure of the product or the marketing program ex: KFC test-marketed its new Kentucky Grilled Chicken for 3 years before rolling it out nationally
business to consumer
consumer gets the products
places
create, maintain or change attitudes or behavior toward particular places
new brands
developed based on belief that the power of its existing brand is waning and a new brand name is needed also used for products in a new product category
gilette uses employee- volunteers to test new shaving products
doing beta test to get a different feedback
line extension
extending an existing brand name to new forms, colors, sizes, ingredients, or flavors within a product category
brand extension
extending an existing brand name to new product categories
what is a product?
include physical objects, services, events, persons, organizations, places, ideas, or a combination thereof
marketing offerings
includes both tangible goods and services, as well as combinations of both - pure good: camay soap - pure service: legal representation - combination: restaurant meal
actual product
includes the brand name, features, design, packaging, and quality level
product and service classification
industrial products
product life cycle
introduction, growth, maturity, decline
what is a price?
narrowly defined, price is the amount of money charged for a product or service broadly defined, price is the sum of all of the values that consumers give up in order to gain the benefits of having or using the product or service
marketing in action: licensing
nickeledeon has developed a stable full of hugely popular characters which can be licensed by marketers - such as spongebob squarepants - that generate billions of dollars of retail sales each year
multibranding
offers a way to establish different features and appeal to different customer segments, lock up more reseller shelf space, and capture a larger market share
supplies and services
operating supplies, maintenance, and repair items
internal marketing
orienting and motivating customer-contact employees and supporting service employees to work as a team to provide customer satisfaction
marketing in action 2
people who buy a blackberry device are buying more than a cell phone. they are buying the ability to "connect to everything you through the power of the blackberry smartphone."
figure 7.2 individual product decisions
product attributes branding packaging labeling product support services
capital items
products that aid in buyer's production or operations (BIG)
organizations
profit and nonprofit (schools and churches)
materials and parts
raw materials, manufactured materials and parts
what is a service?
services are intangible. examples include banking, hotel accomodations, airline travel, tax preparation, legal services, cable and satellite service and others.
value-based pricing
setting prices based on buyers' perceptions of value rather than the seller's cost
competition-based pricing
setting prices based on competitor's strategies, costs, prices, and market offerings
cost pricing
setting prices based on the cost of producing, distributing and selling product at a fair rate of return
margins
the difference between our cost and customer's cost
product mix
the set of all of the product lines and items that a particular seller offers for sale
external marketing
traditional marketing via the 4 Ps
marketing in action 1
umpqua bank designs its "stores" to make banking a pleasurable experience.
Team-based new product development
various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness
core customer value
what the consumer is really buying
